"A tale told by an idiot, full of sound and fury, signifying nothing.” ― William Shakespeare, Macbeth
In the sequel to his hit documentary film “Supersize Me,” Morgan Spurlock opened a fast-food chicken restaurant. On one interior wall, one can read phrases such as “all-natural,” “artisanal,” and “handcrafted”. Beneath those terms, there is text reading, “Not sure what all these words actually mean? Great! Because, legally speaking, they don’t mean much.” Even labeling something as “free-range” only means that an animal has an “option” to go outdoors for “some part” of a day.
Such words have been extensively market-tested to ensure that they successfully send misleading signals to consumers. The convenient truth for businesses is that they need to do very little (or nothing) to earn the right to use such terminology.
Despite the heavy regulations in place to protect investors from deceptive advertising, the financial services industry still has its own share of all-natural hand-crafted gibberish.
Here are a few examples:
Local: This one is tricky. Particularly in difficult times, one way that communities like to come together is to support local businesses. This makes it appealing for any business to try to appear local, in order to profit off of their share of the community goodwill.
Is it enough to have a local office, even if the owners and employees live outside of the area? What about a larger corporation with a local presence? I know the greeter at my town’s Walmart probably lives here, but I also know that the enormous profits from that store are being sent back to Bentonville Arkansas. Do the owners there shop in your town? Does that corporation pay taxes in your area (or at all)?
In my small town in Washington State, three of the largest investment firms are owned by entities in Missouri, Montana, and Oregon. The highest-paid employees often live in the next town over or even 100 plus miles away! Perhaps it is worth asking a few questions before we allow a business to pass themself off as truly “local”.
Boutique: The textbook definition of “Boutique” is any small, exclusive business offering customized service. While this is a lovely notion, the sad truth is that there are no legal requirements for the use of such a term in advertising. For example, in one of my past industry roles, I ran into a “Boutique” firm that had over 300 client households being serviced by one part-time adviser! With numbers like that, you can imagine that the amount of “customized service” was almost non-existent. In fact, more than ⅔ of the client base was essentially being ignored. Nevertheless, there is nothing stopping that firm from calling itself a “Boutique”.
Holistic: This has to be one for the “Poppycock Hall of Fame.” It is a term that many businesses have borrowed from the concepts of holistic psychology, philosophy, and medicine. The basic idea is that the patient is more than the sum of their parts and that their “wellness” (don’t get me started on wellness) depends on treating the whole entity. While I fundamentally agree with this premise, I strongly disagree with how it is being used as a branding tool in the world of investments.
A quick internet search tells me that “Holistic Financial Planning” is a process for achieving one’s goals by managing their resources. Do you know what else that describes? All Financial Planning! A deeper look into the details of the term revealed that the component steps of “Holistic Financial Planning” were exactly the steps of any generic planning process. In fact, they could have easily just been copied and pasted from a textbook.
What is Holistic Financial Planning? Holistic Financial Planning is the process of purchasing advice from someone who fancies themselves a bit more enlightened than your average planner. The Holistic Financial Planner may use terms like “financial wellness,” hire Feng Shui consultants or have taken a handful of yoga classes.
In many past essays, I have offered up some warning signs that investors can look for when deciding who to trust (like this, and this). Long-time readers may know that I am guilty of getting a bit flowery with my language from time to time. There is a difference between being overly descriptive and being deceptive. As the investment industry evolves into a world of greater transparency in business and better-informed clients, perhaps the next battle we have to fight is how we use the language. In the meantime, my advice to the investing public is to look twice whenever you find yourself on the receiving end of Free-Range Artisinal Gibberish.